Maybank IB Views

Top Glove Corporation RM5.28: Hold
Assessing latex cost direction Shariah-compliant

Results below expectations. 1HFY11 net profit of RM62m (-54% YoY) made up 37% of our full-year forecast and 32% of market's. Share price rose 11% since our upgrade to Hold (from Sell) on 8th Mar, largely fuelled by sentiment on tumbling latex cost (-18% in 1-week). Our rating, TP and forecasts are under review as we assess the sustainability of low latex cost and sales recovery. Market is currently valuing Top Glove at 15x CY12 PER, above its 5-year historical average of 13.5x.


Technicals
The FBM KLCI rose 8.30 points yesterday to close at 1,492.44. Its resistance areas of 1,492 and 1,515 will cap market gains, whilst the very weak support areas are located at 1,474 and 1,490. Due to the DJIA’s very bearish tone last night, we will see the FBM KLCI in a weaker mode today, with persistent selling activities on rallies. As the market re-visited 1,474 recently, the FBM KLCI index traced out a nasty Head & Shoulders topping pattern.

Trading idea for today is a Take Profit call on MISC.


Other Local News
E&U: Bakun dam to generate power in July. The Bakun hydroelectric dam is expected to commercially produce 300MW of electricity in July. (Source: The Edge Financial Daily)

TMC: Ties up with Indon bank. TMC Life Sciences Bhd's unit Tropicana Medical Centre (M) Sdn Bhd (TMC) signed a Memorandum of Understanding (MoU) with Indonesia's Bank Riau Kepri to establish a credit card privilege discount programme. TMC is confident of achieving its 60% growth target this year through various marketing and strategic collaborative efforts with local and regional partners. (Source: The Edge Financial Daily)

Pharmaniaga: Secures concession. Pharmaniaga Bhd's wholly owned subsidiary Pharmaniaga Logistics Sdn Bhd has entered into a 10-years concession agreement with the Government for the right and authority to purchase, store, supply and distribute approved products to public sector customers. (Source: Bursa Malaysia)

SEGi: Hii ups stake to 32.2%, named to lead ECCE project. SEG International Bhd's (SEGi) group MD director Datuk Clement Hii Chii Kok has upped his stake further in the education group to 32.2%. Meanwhile, Rextar Capital Sdn Bhd ceased to be a substantial shareholder after disposing of 10.8m shares. Separately, SEGi has been appointed by the Government to lead the development of integrated early child care education under the National Key Economic Area. (Source: The Edge Financial Daily, The Star)

Aviation: Premium air travel to go down this month. The Japanese disaster will reduce premium air travel in March as it makes up 6% to 7% of the global market, the International Air Transport Association (IATA) said. It added that unrest in the Middle East and the Japanese disaster would likely hit February and March figures. (Source: The Star)
Outside Malaysia
U.S: Home construction slumps in February. Home construction dropped 23% to a 479,000 annual rate, while building permits slumped last month to a record low, Commerce Department figures showed. (Source: Bloomberg)

U.S: Producer prices in February rise more than forecast, led by food, oil. The producer-price index climbed 1.6% MoM from the prior month, the most since June 2009. The so-called core measure, which excludes volatile food and energy costs increased 0.2% MoM, matching forecasts. (Source: Bloomberg)

U.S: Mortgage applications fell last week on fewer purchases as a decline in borrowing costs failed to spur home buying. The Mortgage Bankers Association's index of loan applications declined 0.7% in the week ended March 11. The group's purchase index fell 4%, while a measure of refinancing climbed 0.9%.The prospect of further declines in home prices and more foreclosures in coming months may be prompting Americans to refrain from purchases. (Source: Bloomberg)

E.U: February inflation quickens, adding pressure on ECB. Inflation in the 17-nation euro region quickened to 2.4% YoY from 2.3% YoY in January. That's the fastest since October 2008 and exceeded the ECB's 2% limit for a third month. (Source: Bloomberg)

U.K: Jobless claims unexpectedly fall most in eight months in February. Jobless benefit claims dropped 10,200 from January to 1.45 million, the lowest since February 2009. Unemployment based on International Labour Organization methods rose by 27,000 in the three months through January to 2.53 million, the highest since 1994. (Source: Bloomberg)

China: Leading economic index rebounded in January, easing concerns that the government's campaign to curb inflation and asset bubbles may lead to a sudden slowdown in the world's second-biggest economy. The index rose 0.3% to 155 in January from the previous month. The indicator, designed to capture prospects over the coming six months, recorded the first decline since 2008 in December. (Source: Bloomberg)

Japan: Manufacturers were pessimistic in 2Q11 before quake struck. Sentiment among manufacturers with more than JPY 1b (USD 12m) in capital was minus 3.2 points this quarter compared with minus 8 three months ago. The survey was conducted before the nation's biggest earthquake on March 11, and a negative number means pessimists outnumber optimists. (Source: Bloomberg)